Don’t let antiquated partnerships become the most dangerous legacy in BFS enterprises

• In America, CapitalOne has had a long-running marketing campaign extolling the value and flexibility of its credit cards asking “what’s in your wallet?” as a call to action to consider the satisfaction with your current cards. Well, HFS would like to make a similar call to action to banking and financial services (BFS) leaders asking you to consider “what’s in your ecosystem?”
• Never before in the history of all tech-enabled business has the importance of having the right mix of ecosystem partners been higher. As established financial services firms strive to modernize their business operations across ageing tech stacks, attempting to optimize the old while inventing the new, while fighting off continued advances from nimble fintechs and digital challenger banks, during a protracted pandemic, with the majority of its workforce still operating remotely (if they haven’t resigned), innovation expertise is required in spades to help make progress ASAP.
• The BFS sector is the long-reigning leader for tech spend and use of IT and business process services partners. However BFS leadership needs to take a long hard look at its partner ecosystem to ensure that it has the right set of partners to drive rapid and effective change on a go-forward basis.
• Research from our 2021 BFS Top 10 study suggests that a significant innovation gap has occurred in BFS partner ecosystems. Deep-dive interviews with functional and line of business leaders at 45 BFS firms revealed that they are selecting their service partners based on execution-oriented criteria such as delivery quality, array of services, and industry and domain expertise. Innovation criteria such as advisory, digital expertise, automation, availability of IP and 3rd party tech partners are less critical factors.
• The innovation gap becomes apparent when assessing satisfaction with service partners. The same BFS firms have the highest levels of satisfaction with their partners’ execution capabilities, while innovation capabilities rank the lowest, scoring an 8 of 10.

The Bottom Line: Don’t let antiquated approaches to partnering and sourcing become the most dangerous legacy in BFS enterprises. If BFS firms want to get real about transformation and results, they need to prioritize innovation when selecting their partners and reassessing them as fit for rapidly evolving purpose.